Credit where it’s due

On this occasion, Zopa – originator of the first P2P platform and one of the few survivors of the 2008 financial crash to emerge relatively unscathed – deserves praise for its decision last week to ask lenders to form an orderly queue while the company originates loans of suitable quality to match the demand. Rather than a decision born out of weakness, it was one that showed strength and confidence, not to mention common sense.

We know that Zopa is heading down the path towards becoming an orthodox bank, at least in part – it applied for its banking license in November, 2016 – and that it is planning to offer a deposit accounts that are covered by the FSCS sometime in 2018. We can also surmise that, if it wants to fulfil that ambition, it makes perfect sense for Zopa to be seen to be behaving responsibly in the interim. Nevertheless, the company is staying true to its pioneering P2P roots by not falling into the trap of lowering its lending standards to bridge the loans gap that is commonplace throughout the market.

Given the circumstances, it would be all too easy to take advantage of lender appetite by approving loans that are likely to go bad further down the line just to keep the engine turning over. However, to do so would play into the hands of the media and other knockers of Alternative Finance who have been predicting just such an outcome for months. It would have also set the agenda for the new legislation governing P2P that is due to be introduced this summer.

Zopa set the precedent in December when, for the same reason, it raised the drawbridge to new lenders. But that is not to say that everyone else in the business has been operating in a similarly sensible fashion. We can only hope that this is the case. The fact remains that many P2P platforms may not have the muscle power and financial backing to take the longer term view.